When inventors contact my company about Due Diligence I like to explain the reasoning with a simple example. Think of it this way, if a manufacturer is getting ready to make the decision to develop, manufacture, and market a new product that could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would most certainly take their time to ensure that they may be creating a good business decision in continuing to move forward using the product (i.e.: they have done their homework on the product). Therefore, you can summarize “due diligence” as the entire process of gathering all the information necessary to make a good business decision before you make the large financial expenditure. It can generally be assumed that the more time, effort and cash (i.e.: “risk”) that a company must spend to develop New Ideas For Inventions, the more they are going to evaluate the potential license. Stay in mind that even if a product is apparently simple and inexpensive, the whole process of developing and manufacturing is rarely basic and inexpensive. Companies will evaluate such criteria as customer comments, retail price points, unit cost to produce, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they should perform Due Diligence on their own invention. As discussed, this may depend on the option you might have elected when planning on taking your products or services to promote.
Option 1 – Manufacturing all on your own – If you are planning on manufacturing and marketing the invention all on your own, then yes you need to perform homework. Essentially, you are the maker of the product and consequently you should carry out the homework on your own invention just like other manufacturers would. The issue i have found is the fact many inventors who choose to manufacture their very own inventions do little, if any marketing research, which is actually a big mistake.
Option 2 – Licensing for Royalties – if you are planning on licensing for royalties, i then believe you can minimize your due diligence efforts, because prior to any company licensing your invention, they will likely perform their particular homework. If you are employing a company including Invention Home, the expense to market your invention to companies can be minimal – therefore it could set you back more to actually perform the due diligence than it could to just market the Can You Patent An Idea to companies (which, is ultimately your very best form of homework anyway). Remember, you ought to have taken time to do your basic market research along with a patent search earlier in the process to be assured that your product may be worth pursuing to start with (i.e.: the product is not already on the market and you will find a demand).
Let me summarize. If you are planning on investing a lot of cash on your invention, then you should always analyze the opportunity first to make certain it’s worth pursuing; however, if you can actively advertise your invention to companies with minimal cost, you can be assured that an interested company will do their very own due diligence (not depend on yours). Note: it will always be beneficial to have marketing homework information available when you discuss your invention opportunity with prospective companies; however, it is really not easy to acquire this info so you need to balance the effort and cost of gathering the information with the real need of having it.
In addition, i provides you with some due diligence tips.As discussed, the thought of marketing homework is to gather as much information as possible to create a well-informed decision on investing in any invention. In a perfect world, we would have the relevant info on sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this info might not be easy to find.
If you are not in a position to cover an expert firm to accomplish your marketing evaluation, it is actually easy to carry out the research all on your own; however, you need to understand that research should be interpreted and used for decision-making and by itself, it offers no value. It is whatever you use the data that matters. Note: I might recommend that you DO NOT PURCHASE “researching the market” from an Invention Promotion company. Often sold as being a “initial step” (they’ll usually approach you again with the expensive “marketing” package), the information is largely useless as it is not specific research on your invention. Rather, it really is off-the-shelf “canned” industry statistics, that can not always assist you in making an educated decision.
Before we arrive at the “tips”, let me clarify that “research” can come under various names, but essentially each of them mean the same thing. A few of the terms i have witnessed to describe the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Market Research
· Invention Assessment
Each of these terms is basically talking about the research to assess the likelihood of your invention’s salability and profitability. The question of whether your invention will sell can do not be known with certainty, however, you can perform some steps that will help you better comprehend the chance of success.
Again, if you are intending on manufacturing your invention by yourself, you should look at performing marketing research on your product. If you are intending on licensing your invention for royalties the company licensing your invention should perform this research.
Some suggestions for marketing homework are the following.
1. Ask and answer some elementary questions
– Is the invention original or has another person already think of the invention? Hopefully, you may have already answered this inquiry inside your basic research. If not, check trade directories or even the Internet.
– Can be your invention a solution to a problem? Or even, why do you think it can sell?
– Does your invention really solve the situation?
– Can be your invention already on the market? In that case, precisely what does your invention offer over the others?
– How many competing products and competitors can you find on the market?
– What is the range of value of the products? Can your products or services fall into this range? Don’t forget to element in profit and perhaps wholesale pricing and royalty fee, if any.
– Can you position your invention being a better product?
2. List the advantages and disadvantages that will impact how your invention sells and objectively evaluate your list
– Demand – is there a preexisting demand for your invention?
– Market – does a market exist for your invention, and when so, what exactly is the scale of the current market?
– Production Capabilities – could it be easy or hard to produce your invention?
– Production Costs – can you obtain accurate manufacturing costs (both per unit and setup/tooling)?
– Distribution Capabilities – will it be easy or challenging to distribute or sell your invention?
– Advanced features – does your invention offer significant improvements over other similar products (speed, size, weight, simplicity of use)?
– Retail Price – have you got a price point advantage or disadvantage?
– Life – will your invention last longer than other products?
– Performance – does your invention perform a lot better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – will it be difficult or easy to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are there special laws that must be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts in the field.
– Ask for objective feedback and advice.
– Talk to marketing professionals.
– Ask sales representatives in the field.
– Ask people you know within the field.
– Speak to close family and friends whom you trust.
– Ask for input on the invention such as features, benefits, price, and if they might purchase it.
During the diligence stage, existing manufactures come with an advantage in this they have the capacity to talk with their clients (retail buyers, wholesalers, etc.). Inside my experience, one of the most important factors which a company will consider is whether or not their existing customers would buy the product. Basically If I took Inventhelp Invention Marketing to some company to talk about licensing (assuming they could produce it in the right price point), there exists a very high likelihood they would license the merchandise if one of their top customers consented to market it.
Whether a retail buyer is interested in purchasing a item is a driving force for companies considering product licensing. I’ve seen many scenarios where a company had interest within an invention but they ultimately atgjlh to pass through on the idea since their customer (the retailer) failed to show any interest in the product. Conversely, I’ve seen companies with mild interest inside an idea who jump at a cool product each time a retailer expresses interest in it.